Oilers owners losing game of optics in bid for new arena: Additional $6-million in funding ‘impossible,’ Edmonton says

Edmonton Oilers owners losing game of optics in bid for new arena

ANALYSIS

Sitting before the semi-circle desk of Edmonton’s city council, the senior members of the Katz Group looked much like a professional hockey team wandering onto a lacrosse field and asking: “Where’s the puck? Why are there nets at the end of our sticks? Where did the ice go?”

Council voted on Wednesday to appoint a mediator and re-open negotiations with the Katz Group over a new, $485-million downtown arena for the Katz-owned Edmonton Oilers, despite Katz officials’ weak grasp of the rules of the game of politics, in which optics are key for the other side in the negotiations.

Talks had stalled in October after the company, which owns the team, demanded an additional subsidy, refused to appear before council to explain their position and began making footsie motions with Seattle. It sparked a bitter backlash among even die-hard Oilers fans.

Most councillors who spoke Wednesday expressed almost as much concern with the loss of trust between the two parties as with the deal itself.

To move this forward, we have to feel comfortable to go out and talk to our city

“You’re dealing with a different type of business deal than what you would normally do in business … there are 13 people around the front here, plus we also represent an awful lot of people in the community. So this is the trust issue, you have to start with that,” said Councillor Ed Gibbons. “To move this forward, we have to feel comfortable to go out and talk to our city, take emails and return phone calls to everybody, whatever side of the fence they’re on.”

The Katz Group’s public submissions to council on Wednesday were a good opportunity to woo back disenchanted Edmontonians, and John Karvellas, the Katz Group’s executive vice-president, said he recognized the problem.

“We were stunned by the decision city council made on Oct. 17 to terminate negotiations. We do not want the downtown arena project to die,” he said.

“You can be comfortable we’re not playing any games with you or being sneaky. We’re trying to regain the trust we lost a few months back.”

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Still, the Katz officials made blunders of protocol, presenting the council with a pre-written motion that would re-open negotiations — a task the city reserves for itself.

If anyone was insulted, “I apologize for that,” Mr. Karvellas said.

“We’re all learning how to work together here,” said Councillor Don Iveson.

The two sides had already had a deal. Last year, the council agreed to a framework with the Katz Group. Of the $450-million budgeted for the arena, the Katz Group would put up $100-million, to be paid over 35 years. A user fee would generate $125-million, and the city would contribute an equivalent amount through a Community Revitalization Levy, and other sources. The remaining $100-million remains unfunded, a problem that seems unlikely to be solved by the provincial government given recent allegations with regards to Mr. Katz’s fundraising activities on behalf of Premier Alison Redford’s Progressive Conservatives.

The city would own the new arena, but the Katz Group would receive the revenues and naming rights. The company would pay for upkeep.

The political optics for us would be very politically impossible and something the public just would not go for

As plans progressed, estimates of the arena’s cost began to rise to as much as $485-million. Then the Katz Group said it needed more money: a $6-million subsidy to pay for upkeep, lest the sustainability of the Oilers in Edmonton be jeopardized.

“You realize,” councillor Dave Loken told the Katz officials Wednesday, “the political optics for us would be very politically impossible and something the public just would not go for.”

Mr. Karvellas understood the subsidy represented a “fixed cost” obligation to the city — suggesting he may have been missing the point. In the subsidy’s stead, he proposed the city put whatever tax revenue it gained beyond the city’s projections into a reserve account that could then be used to maintain the arena.

Councillor Amarjeet Sohi said: “I’m struggling to understand how the creation of a reserve would be different from a subsidy.”

Mr. Karvellas responded: “I understand that if it walks like a duck, talks or quacks like a duck, then it’s a duck, but I don’t think this is a duck.”

The Katz Group said it was willing to open its financial projections on the arena to the scrutiny of a third party. However, it was not willing to prove to the city that the Oilers are in such dire straights that the viability of the team is under threat of sale if a new arena is not built.